Infineon cuts workers hours ahead of downturn

LONDON – German chip maker Infineon Technologies will cut hours for some employees and is delaying or cancelling projects as it attempts to weather the current economic storm in Europe.

The moves come despite Infineon's profitable fourth fiscal quarter and fiscal 2012. Infineon made a net income of 138 million euros (about $175 million) on sales revenue of 982 million euros (about $1.25 billion) in the fourth fiscal quarter ended Sept. 30, 2012. For the full year Infineon made a net income of 427 million euro (about $544 million) on annual revenue of 3,904 million euro (about $4.97 billion). However, sales on a quarterly basis were down sequentially by 1 percent and by 5 percent compared with the same quarter a year before.

The cuts and other measures were revealed by incoming CEO Reinhard Ploss as he discussed the financial results. Ploss took over from retiring CEO Peter Bauer at the end of the financial year.

In a statement Ploss said: "It was already clear this summer that the economic headwind is increasing and times are getting harder. Despite its strength, Infineon cannot escape this situation. Signs of further declines in revenues and especially, in our margin, are becoming clear."

In response Infineon is introducing four measures to try and save more than 100 million euros (about $125 million) of cost in the company's 2013 fiscal year. This should reduce the budgeted investment for FY13 from 500 million euro to 400 million. This compares with the investment budget of 890 million euro in FY2012.

Infineon CEO Reinhard Ploss

Under an initiative called "cold steel" Infineon will cut production costs by temporarily switching off underutilized equipment, as well as reducing the temporary workforce and the selective use of short-time work.

In R&D and sales and marketing Infineon plans to postpone or cancel projects of lesser strategic importance and reduce payments to external service providers.

The company is freezing headcount and postponing salary increases by six months and it is reducing its budget for consulting and travel costs to a minimum.